When most investors think about the great investors of all-time, names like Warren Buffett, Peter Lynch, and Benjamin Graham often come to mind. Lesser known is David M. Blitzer, whose record for more than two decades has topped the majority of common stock mutual funds.

Mr. Blitzer, who will soon be retiring, has been at the helm of Standard and Poor’s for the past 24 years, where he chairs the committee that chooses those companies that comprise the S&P 500 Index.

Pioneers like Jack Bogle at Vanguard championed the idea of “passive” management by building index funds, which simply seek to replicate the returns of well-known benchmarks. The most popular benchmark for the U.S. equity market is the S&P 500.

When Mr. Blitzer began his tenure, passive funds made up less than 5 percent of total assets invested in stock mutual funds. By the time he officially steps down, passively managed funds and ETFs will account for about half of all U.S. equity funds. The trend shows no sign of slowing.

The investment record of the S&P 500 explains this shift. According to the S&P Dow Jones SPIVA Scorecard, 92 percent of all large cap U.S. equity funds have underperformed the S&P 500 over the 15-year period ending in December 2018. Since 1994, the S&P 500 has returned an annualized 9.5 percent per year, including dividends. The index is largely driven by firm but simple rules, though the final decision for inclusion can come down to a subjective committee decision.

David Blitzer may not be a household name, but his work has helped spur the trend toward passive management. Our strategy is also rules-based, though not strictly passive. We assert that the first step is to recognize the shortcomings of active stock picking and high-cost mutual funds. Mr. Blitzer’s legacy certainly helps to make the case.

Also in This Issue:

Quarterly Review of Capital Markets
AIS Sample Standard Allocations
Are Small Cap and Value Stocks Still Worth Pursuing
The High-Yield Dow Investment Strategy
Recent Market Statistics
The Dow-Jones Industrials Ranked by Yield
Recommended Investment Vehicles